Wednesday, October 12, 2005

Last month, the UAE's Central Bank governor said he expected the inflation to be around 6.5 per cent this year. A recent International Monetary Fund study also estimates the growth to be in excess of 10 per cent with the inflation close to 6 per cent. However, a recent survey of economic analysts from the region by Reuters showed the inflation situation as alarming.

“Regardless of the official rates, we are looking at hyper inflation. It is between 20 and 30 per cent this year in the UAE,” a Dubai-based analyst was quoted in the report.

Economists and analysts say, in addition to the fact that demand far exceeding the supply of goods and services resulting in the price hike, there are a number of cost related factors including the fuel price hike and the rising costs of imported items due to weakening of dollar against other leading currencies.

“The UAE's inflationary pressures have also been accelerated by the dollar's persistent weakness in the past three years, which has fed through into a rise in the price of imports as dirham is pegged to dollar,” said an economist with a foreign bank.